If you are affiliated with an Afore, the new generational fund scheme will allow you to have better savings for retirement.
The National Commission of the Retirement Savings System (Consar) announced that, as of December 13, 2019, the Retirement Fund Investment Companies (Siefores) would migrate to a new scheme so that Mexican workers maintain a better investment in your retirement savings.
Due to the previous system, it was constantly renewed and savings started from scratch, making the savings investment less at the time of retirement.
The new scheme is known as generational funds or siefores and its objective is to improve the performance of the Afores that are granted to the beneficiaries of the ISSSTE or IMSS.
What are the benefits of the new generational siefores scheme?
- Easier procedures without changing resources
- You stay in the same generational pool until retirement
- Offers investment strategies oriented to the retirement horizon
- Offers instruments appropriate to the borrower’s age
Easier procedures without changing resources
Previously, the Afores had a basic siefores scheme that was divided into 5 funds where the resources of the workers were invested throughout their working life, changing on 4 different occasions as their age increased.
Now the generational funds will have 10 siefores for each generational block and will be assigned according to the year of birth of the beneficiary.
Therefore, the new generational siefores scheme allows the process to be simpler and the resources of the employees do not change.
You stay in the same generational pool until retirement
Among the benefits of the new generational siefores scheme is that you will remain in the same generational block throughout your working life.
Allowing investment savings to be protected in the same fund until retirement and only the way in which the money is invested will change according to the conditions of the Afore.
However, if the person entitled to Infonavit or Fovissste If you wish, you may request to be placed in a different Siefore as your age increases. You must choose the risk conditions and the most convenient return for your credit.
Investment strategies oriented to the retirement horizon
The generational funds of the siefores will adapt to the investment strategy according to the retirement horizon of each generation.
This means that, over time, more conservative investments will be made in relation to retirement age.
Instruments appropriate to the borrower’s age
The method of the previous basic siefores was not as effective since, as the person approached retirement age, the returns were transferred to another siefores of the next generation group, causing the resources to begin to be invested from scratch and avoiding long-term savings.
The new generational siefores scheme is responsible for changing the composition of the investment portfolio to offer more appropriate instruments according to the age of the workers.
For example, if you are a beneficiary of the Initial Basic Fund (less than 25 years old), more active risk resources will be allocated to protect the shares. But, if you belong to the Basic Pension Fund (over 65 years old) you are getting closer to retirement. Therefore, at least 51% of safe assets will be assigned to protect inflation and ensure retirement savings.
The generational funds will allow the account holders of the Retirement Savings System (SAR), to aspire to a better investment of their savings, strengthening themselves in the long term by maximizing the amount of the pension.
It is very important that you know the balance of the Housing Subaccount that you have saved for retirement.
We recommend that you choose the best generational siefores scheme and investigate which Net Return Indicator suits you best and compare it with different Afores in Mexico. You must take into account the commission they charge and the services they provide.
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